Non-performing note buyout

[Kevin Romines]

I have a friend of mine that has been looking at a house that he wants to get. The owner has passed and the wife is not on title. The wife and husband were married years ago and then got a divorce, they never got remarried, but have been together for many years since then. So she's not on title, and he is not sure if there was a will? I suggested that he contact the lender and consider buying out the 1st lien position. The wife has told my friend that she's walking away from this home as its underwater with 2-3 mortgages and several judgements.

The 1st has 55K owing on it and the total of all liens is between 250-300K yet the house is worth 200K. If my friend buys out the 1st mortgage lender, and then forecloses on the property, does he get to set the minimum opening bid at the auction at the amount owning by all liens on the property, or just his 1st mortgage lien position?

If he can set it at the total lien amount, most likely nobody will bid on it and it will revert back to him, thereby wiping out all junior liens and he can now sell the house at a profit. If he can only set the opening bid at what his lien amount of 55K would be, then he only stands to get his 55K. so he would need to buy the lien at a good discount in order to make any money?

Any thoughts or strategies?